MannKind in Jeopardy

MannKind Corp. (MNKD) recently suffered a major setback with the US Food and Drug Administration (FDA) issuing a complete response letter (CRL) for its new drug application (NDA) for type I and type II diabetes treatment Afrezza. MannKind’s share price plummeted 44% in after hours trading, following the announcement of the news.

We note that Afrezza utilizes MannKind’s proprietary dry powder Technosphere insulin formulation. It is inhaled deep into the lungs using the company’s MedTone inhaler. Once inside the lungs, the insulin is rapidly absorbed into the bloodstream.

In the CRL, the regulatory body has asked the company to conduct two phase III trials with the next-generation inhaler. One trial will be earmarked for patients with type I diabetes and the other for type II diabetes patients. Further, at least one trial should include a treatment group using the MedTone inhaler in order to obtain comparative data for the two devices.

Additionally, the FDA said that there should be a minimum of twelve weeks of relatively stable insulin dosing at the end of the treatment period, post adequate titration of Afrezza.

The regulatory body has also asked for additional information on the performance characteristics, usage, handling, shipment and storage of the next-generation device. An update of safety information of Afrezza as well as information on labeling changes has also been sought.

MannKind said that it already has some phase III trials in progress and that should help address the FDA’s requests. However, the company will have to modify one of the studies in order to collect the comparative data between the next-generation inhaler and MedTone inhaler.

Story So Far

We remind investors that in late December 2010, the FDA had extended its review period for Afrezza by four weeks. The Prescription Drug User Free Act (PDUFA) date was originally set for December 29, 2010.

The regulatory body had earlier accepted MannKind’s resubmitted NDA in July last year after issuing a CRL on Afrezza in March 2010 due to insufficiency of data. While issuing the CRL, the NDA had asked for information about the commercial version of the company’s MedTone inhaler, which is different from the one used during clinical trials. Furthermore, the FDA had requested updated safety data.

Our Take

We currently have a Zacks #4 Rank (short-term Sell rating) on MannKind. We note that Afrezza is the company’s only late-stage candidate under development. Hence, the recent CRL for Afrezza is a cause of major concern for MannKind, which has no marketed products in its portfolio. Besides Afrezza, the company’s pipeline primarily consists of products in early stages of development.

Our skepticism on Afrezza approval is further deepened by failures encountered by many other companies in introducing an inhaled version of insulin to the market.

It is worth noting that Pfizer Inc. (PFE) withdrew Exubera from the market in October 2007, followed by the discontinuation of the AER-X program by Novo Nordisk (NVO), in development with Novartis AG (NVS) and Aradigm Corp. (ARDM), in January 2008 and then the announcement by Eli Lilly & Co. (LLY) and co-developer Alkermes Inc. (ALKS), in March 2008, to discontinue the development of AIR Insulin.

Longer term, we have a Neutral recommendation on MannKind.

MANNKIND CORP (MNKD): Free Stock Analysis Report

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